Disability Insurers Are Put On Notice

Sydney Morning Herald

Wednesday March 16, 2005

Anne Lampe

Superannuation fund trustees and group insurers that knock back claims from fund members for permanent disability payouts should take note of a recent NSW Supreme Court decision involving an injured barman, his superannuation fund trustee, Club Plus Superannuation Pty Ltd, and the insurer Group Life Insurance.

In a nutshell, the court found that the trustee simply went along with the decision of the life insurance company, which refused to pay a benefit and ignored further medical assessments that supported the fund member's claim. These assessments were submitted to the insurer and the fund trustee when they confirmed their decision not to pay a disablement benefit last year.

The fund member, James Nile, suffered a work injury in 1996 while working as a bar steward for Riverwood Legion Club. He obtained reports from five doctors and eventually was paid a workers' compensation benefit. The club's workers' compensation insurer noted that Nile was unable to work for 12 months and the club said it could not hold his position and terminated his employment. So he made a claim on his super fund.

Several medical reports were provided, some supporting Nile's claim and some indicating that, while he could work at some jobs, he could not work in the job he had been doing.

The insurer and the fund trustee again concluded that Nile's medical condition did not fit the definition of permanent disablement set out in the fund's trust deeds.

Nile lodged a complaint with the Superannuation Complaints Tribunal in 1998. The tribunal observed that the medical evidence at the time did not support his claim for permanent disablement.

Three years later the trustee and the insurer reconfirmed their earlier decisions to reject the claim after considering additional medical evidence supplied by Nile.

Dissatisfied with this, Nile took the matter to court and put forward additional medical evidence which supported his claim that he satisfied the permanent disability definition. Evidence was also provided about his limited work experience, training and education.

Last year Group Life reconsidered the claim and once again rejected it. The trustee did the same at a claims committee meeting last year.

The court set aside both decisions after finding that they failed to give real and genuine consideration to Nile's claim that the trustee breached its duty.

The court said it was impossible to see how the reconsideration of Nile's claim by the trustee committee could have possibly be given the attention necessary as almost 20 matters were considered in under an hour of meeting. The court found that the trustee had merely rubber-stamped the insurer's decision.

The court set aside the insurer's decision on the grounds that it breached the insurer's duty of good faith and fair dealing, which required it to have due regard to the interests of the claimant and to act reasonably.

The matter is due to go before the court again soon, but the decision shows that both insurers and fund trustees have to read all the material relating to claims put before them and come up with reasons for refusing to pay out permanent disability claims.

And fund members have a right to demand those reasons, which should reflect the medical evidence.

© 2005 Sydney Morning Herald

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